Notice2021-24013
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Extend the Exchange's Nonstandard Expirations Pilot Program
Primary source
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Published
November 4, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 211 (Thursday, November 4, 2021)</title>
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[Federal Register Volume 86, Number 211 (Thursday, November 4, 2021)]
[Notices]
[Pages 60952-60955]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-24013]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93464; File No. SR-Phlx-2021-65]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change to Extend the
Exchange's Nonstandard Expirations Pilot Program
October 29, 2021.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on October 28, 2021, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the Exchange. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to extend the pilot period for the Exchange's
nonstandard expirations pilot program, currently set to expire on
November 4, 2021.
The Exchange also proposes a technical amendment to Options 4,
Section 5, Series of Options Contracts Open for Trading.
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/phlx/rules">https://listingcenter.nasdaq.com/rulebook/phlx/rules</a>, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the
[[Page 60953]]
proposed rule change. The text of these statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
On December 15, 2017, the Commission approved a rule change for the
listing and trading on the Exchange, on a twelve month pilot basis, of
p.m.-settled options on broad-based indexes with nonstandard
expirations dates (``Program'').\3\ The Program permits both Weekly
Expirations and End of Month (``EOM'') expirations similar to those of
the a.m.-settled broad-based index options, except that the exercise
settlement value of the options subject to the pilot are based on the
index value derived from the closing prices of component stocks. This
pilot was extended various times and is currently extended through
November 4, 2021.\4\
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\3\ See Securities Exchange Act Release No. 82341 (December 15,
2017), 82 FR 60651 (December 21, 2017) (approving SR-Phlx-2017-79)
(Order Approving a Proposed Rule Change, as Modified by Amendment
No. 1 and Granting Accelerated Approval of Amendment No. 2, of a
Proposed Rule Change To Establish a Nonstandard Expirations Pilot
Program).
\4\ See Securities Exchange Act Release Nos. 84835 (December 17,
2018), 83 FR 65773 (December 21, 2018) (SR-Phlx-2018-80); 85669
(April 17, 2019), 84 FR 16913 (April 23, 2019) (SR-Phlx-2019-13);
87381 (October 22, 2019), 84 FR 57788 (October 28, 2019) (SR-Phlx-
2019-43); 88684 (April 17, 2020), 85 FR 22781 (April 23, 2020) (SR-
Phlx-2020-24); 90256 (October 22, 2020), 85 FR 68393 (October 28,
2020) (SR-Phlx-2020-48); and 91484 (April 6, 2021), 86 FR 19050
(April 12, 2021) (SR-Phlx-2021-21).
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Pursuant to Phlx Options 4A, Section 12(b)(5)(A) the Exchange may
open for trading Weekly Expirations on any broad-based index eligible
for standard options trading to expire on any Monday, Wednesday, or
Friday (other than the third Friday-of-the-month or days that coincide
with an EOM expiration). Weekly Expirations are subject to all
provisions of Options 4A, Section 12 and are treated the same as
options on the same underlying index that expire on the third Friday of
the expiration month. Unlike the standard monthly options, however,
Weekly Expirations are p.m.-settled.
Similarly, pursuant to Options 4A, Section 12(b)(5)(B) the Exchange
may open for trading EOM expirations on any broad-based index eligible
for standard options trading to expire on the last trading day of the
month. EOM expirations are subject to all provisions of Options 4A,
Section 12 and treated the same as options on the same underlying index
that expire on the third Friday of the expiration month. However, the
EOM expirations are p.m.-settled.
The Exchange now proposes to amend Options 4A, Section 12(b)(5)(C)
so that the duration of the Program for these nonstandard expirations
will be through May 4, 2022. The Exchange continues to have sufficient
systems capacity to handle p.m.-settled options on broad-based indexes
with nonstandard expirations dates and has not encountered any issues
or adverse market effects as a result of listing them. Additionally,
there is continued investor interest in these products. The Exchange
will continue to make public on its website any data and analysis it
submits to the Commission under the Program.
The Exchange will be submitting a rule change to request that the
pilot program become permanent. In lieu of submitting any additional
annual reports, the Exchange would provide additional information
requested by the Commission in connection with the permanency rule
change for this Program. The Exchange would continue to provide the
Commission with ongoing data unless and until the Program is made
permanent or discontinued.
The Exchange believes that the proposed extension of the Program
will not have an adverse impact on capacity.
Technical Amendment
The Exchange proposes a technical amendment to Options 4, Section
5, Series of Options Contracts Open for Trading. Specifically, the
Exchange proposes to amend the second sentence of Supplementary
Material .03 to Options 4, Section 5, related to the Short Term Options
Series Program, which states, ``The Exchange may have no more than a
total of five Short Term Option Expiration Dates, not including any
Monday or Wednesday SPY Expirations as provided below.'' The Exchange
proposes to amend the sentence to instead provide, ``The Exchange may
have no more than a total of five Short Term Option Expiration Dates,
not including any Monday or Wednesday SPY, QQQ and IWM Expirations as
provided below.'' The Exchange previously filed to permit Monday and
Wednesday expirations for options listed pursuant to the Short Term
Options Program on the Invesco QQQ Trust\SM\ Series ETF Trust
(``QQQ''),\5\ and recently filed and was approved to permit Monday and
Wednesday expirations for options listed pursuant to the Short Term
Options Program on the iShares Russell 2000 ETF (``IWM'').\6\ The
Exchange inadvertently omitted the references to ``QQQ'' and ``IWM'' in
the rule text for those filings. At this time, the Exchange proposes to
add ``QQQ and IWM'' to the rule text within Supplementary Material .03
to Options 4, Section 5 for clarity. This amendment is non-substantive
as it proposes to make clear that Monday and Wednesday expirations are
not included in determining the maximum number of Short Term Option
Expiration Dates that may be listed on the Exchange. Short Term Options
Series expire, by definition, on Friday. To avoid any confusion, the
proposed amendment makes clear which Monday and Wednesday expirations
are specifically being excluded by the Exchange.
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\5\ See Securities Exchange Act Release No. 91614 (April 20,
2021), 86 FR 22082 (April 26, 2021) (SR-Phlx-2021-10) (Order
Approving a Proposed Rule Change To Permit Monday and Wednesday
Expirations for Options Listed Pursuant to the Short Term Options
Program on the Invesco QQQ Trust\SM\ Series ETF Trust).
\6\ See Securities Exchange Act Release No. 93157 (September 28,
2021), 86 FR 54749 (October 4, 2021) (SR-PHLX-2021-43) (Order
Approving a Proposed Rule Change To Permit Monday and Wednesday
Expirations for Options Listed Pursuant to the Short Term Options
Program on the iShares Russell 2000 ETF (IWM)).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\7\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\8\ in particular, in that it is designed to promote
just and equitable principles of trade, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general to protect investors and the public interest.
The Exchange believes the proposed rule change will protect investors
and the public interest by providing the Exchange, the Commission and
investors the benefit of additional time to analyze nonstandard
expiration options. In particular, the Exchange believes that the
Program has been successful to date. The Exchange has not encountered
any problems with the Program. By extending the Program, investors may
continue to benefit from a wider array of investment opportunities.
Additionally, both the Exchange and the Commission may continue to
monitor the potential for adverse market effects of p.m.-settlement on
the market, including the
[[Page 60954]]
underlying cash equities market, at the expiration of these options.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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Technical Amendment
The Exchange's proposal to amend Supplementary Material .03 to
Options 4, Section 5, related to the Short Term Options Series Program,
to add rule text related to Monday and Wednesday expirations for
options listed pursuant to the Short Term Options Program on QQQ and
IWM, which was inadvertently omitted, is consistent with the Act.
Adding references to ``QQQ'' and ``IWM'' within the second sentence of
Supplementary Material .03 to Options 4, Section 5 will bring greater
clarity to the Exchange's rules by explicitly stating which Monday and
Wednesday expirations are specifically being excluded by the Exchange.
This amendment is non-substantive and is intended to promote clarity
and avoid investor confusion.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. Options with nonstandard
expirations would be available for trading to all market participants.
Technical Amendment
The Exchange's proposal to amend Supplementary Material .03 to
Options 4, Section 5, related to the Short Term Options Series Program,
to add rule text related to Monday and Wednesday expirations for
options listed pursuant to the Short Term Options Program on QQQ and
IWM, which was inadvertently omitted, does not impose an undue burden
on competition as adding references to ``QQQ'' and ``IWM'' within the
second sentence of Supplementary Material .03 to Options 4, Section 5
will bring greater clarity to the Exchange's rules by explicitly
stating which Monday and Wednesday expirations are specifically being
excluded by the Exchange. This amendment is non-substantive and is
intended to promote clarity and avoid investor confusion.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change does not: (i) Significantly affect
the protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate, it has become effective pursuant to Section
19(b)(3)(A) of the Act \9\ and subparagraph (f)(6) of Rule 19b-4
thereunder.\10\
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6). In addition, Rule19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \11\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \12\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has asked the Commission to waive the 30-day operative delay so that it
may immediately extend the Program prior to the current expiration date
so that the pilot may continue uninterrupted. In addition, the Exchange
states the non-substantive technical amendment to Supplementary
Material .03 to Options 4, Section 5, will promote clarity and avoid
investor confusion. The Commission believes that waiving the 30-day
operative delay is consistent with the protection of investors and the
public interest as it will allow the Program to continue uninterrupted,
thereby avoiding investor confusion that could result from a temporary
interruption in the Program, and will allow the Exchange to immediately
update its rules to reflect the technical amendment. Accordingly, the
Commission hereby waives the operative delay and designates the
proposed rule change operative upon filing.\13\
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\11\ 17 CFR 240.19b-4(f)(6).
\12\ 17 CFR 240.19b-4(f)(6)(iii).
\13\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#80f2f5ece5ade3efedede5eef4f3c0f3e5e3aee7eff6"><span class="__cf_email__" data-cfemail="196b6c757c347a7674747c776d6a596a7c7a377e766f">[email protected]</span></a>. Please include
File Number SR-Phlx-2021-65 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-Phlx-2021-65. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish
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to make available publicly. All submissions should refer to File Number
SR-Phlx-2021-65, and should be submitted on or before November 26,
2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-24013 Filed 11-3-21; 8:45 am]
BILLING CODE 8011-01-P
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